Prudential Locations, LLC v. Gagnon
Decision Date | 01 April 2022 |
Docket Number | SCWC-16-0000890,SCWC-17-0000216 |
Parties | PRUDENTIAL LOCATIONS, LLC, Respondent/Plaintiff-Appellant, v. LORNA GAGNON and PRESTIGE REALTY GROUP LIMITED LIABILITY COMPANY, Petitioners/Defendants/Cross-Claim Defendants-Appellees, and RE/MAX LLC and LORRAINE CLAWSON, Respondents/Defendants/Cross-Claimants/ Third-Party Plaintiffs-Appellees, and KEVIN TENGAN, Respondent/Third-Party Defendant-Appellee. |
Court | Hawaii Supreme Court |
with him on the briefs)
for respondents/defendants appellees
(Paul Alston and Kristin L. Holland, with him on the briefs)
for respondent/plaintiff appellant
Joseph A. Ernst
for amicus curiae
McKENNA AND WILSON, JJ., AND CIRCUIT JUDGE MORIKAWA, ASSIGNED BY REASON OF VACANCY, WITH RECKTENWALD, C.J., CONCURRING IN PART AND DISSENTING IN PART, WITH WHOM NAKAYAMA, J., JOINS
This case addresses the enforceability of a non-compete agreement restricting Lorna Gagnon ("Gagnon"), a former employee of Prudential Locations, LLC ("Locations"), from "establishing her own brokerage firm in the State of Hawai'i within one year after terminating her employment with Locations" and from soliciting persons "employed" or "affiliated with" Locations. At issue are two restrictive clauses within the non-compete agreement: a non-compete clause and a non-solicitation clause.
We hold as follows: (1) the ICA erred in failing to address whether the non-compete and solicitation clauses were ancillary to a legitimate purpose not violative of HRS Chapter 480, as required by HRS § 480-4(c) (Supp. 2015); (2) restricting competition is not a legitimate ancillary purpose, as HRS § 480-4(a) prohibits contracts in restraint of trade or commerce in the State; (3) to establish a violation of a nonsolicitation clause, there must be evidence that the person subject to the solicitation clause actively initiated contact; and (4) summary judgment was properly granted in favor of Gagnon as to the non-compete clause, but summary judgment should not have been granted for one agent as to the non-solicitation clause due to a genuine issue of material fact regarding whether Gagnon actively initiated contact.
We therefore vacate the Intermediate Court of Appeals' ("ICA") July 2, 2020 judgment on appeal and the Circuit Court of the First Circuit's ("circuit court") December 9, 2016 final judgment in favor of Gagnon and remand to the circuit court only with respect to the alleged breach of the solicitation clause as to one agent. We otherwise affirm the judgments of the ICA and the circuit court.
Locations is a real estate brokerage firm with offices in Kapahulu, Pearlridge, Mililani, Kailua, and Kapolei. Gagnon worked as a real estate salesperson in New Hampshire from 1989 and later became a licensed real estate broker in 1999. Gagnon had previously owned an independent brokerage business, and from 2003 to 2008, she owned and operated a RE/MAX real estate franchise in New Hampshire.
In 2008, Gagnon moved to Hawai'i after interviewing with Locations while on the mainland, then accepted a "sales coach" position with Locations. On August 8, 2008, Gagnon signed a "Confidentiality and Non-Competition Agreement." The Confidentiality and Non-Competition Agreement contained four parts: (1) recitals; (2) confidentiality and proprietary rights; (3) agreement not to compete ("Non-Compete Agreement"); and (4) remedies of company. The Non-Compete Agreement was comprised of non-compete and non-solicitation clauses. In summary, the clauses prohibited Gagnon from establishing her own brokerage firm in the State of Hawai'i and from soliciting other persons affiliated with Locations to terminate their affiliations to work with her. The clauses prohibited these acts for a one-year period after her employment termination.
The Confidentiality and Non-Compete Agreement provided as follows:
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